Good Article from Maxim Group
Vringo (VRNG) Worth $10/Share - Maxim
9:28 AM ET, 02/27/2013 - Street Insider
Maxim Group reiterated its Buy rating and $10 price target on Vringo (NYSE: VRNG) Wednesday saying the ZTE Corporation lawsuit based on Nokia patents could generate surprising upside for VRNG.
"The trial should be held in Mannheim, Germany in the fall (3Q13), and we believe proceeds of an estimated $129M, or $1.33 per share, could be realized shortly thereafter," analyst John Tinker notes. "ZTE represents only ~7% of the market."
He notes VRNG also filed a infringement lawsuit against Microsoft (NASDAQ: MSFT). Net proceeds from a lawsuit win could be an estimated $71M, or $0.73/share, he said.
"VRNG is currently trading at a market cap of ~$300M/$3.10 per share - a ~13% discount to the reasonable value of the Google (NASDAQ: GOOG) win of $2.87 per share and the net cash of $0.66 per share, assuming an appeal process that could take another 14 months."
Tinker said VRNG may settle with ZTE in order to demonstrate an ability to actually generate cash. ". This would be similar to the low AOL (NYSEl AOL) settlement amount of ~$100,000, but it could set the stage for the remaining ~70% of the telecom equipment market," he said.
"The possibility of an appeal could delay realization of cash flow for another year, highlighting the attractiveness of immediate cash. A cash settlement with ZTE could highlight the potential of high returns on the NOK patent portfolio, given that VRNG only paid $22M plus 35% of the backend royalties. Resolution of the ZTE lawsuit should ascribe a dollar value/royalty rate to the patents portfolio and make it a simpler story for investors to value the NOK patents "royalty rate of perhaps 2% times the telecom equipment market size of $100B."
The leverage that VRNG brings, according to the analyst, is that the Judge in the regional Mannheim Regional Court (infringement hearing) could issue an injunction against ZTE prohibiting the sale of its products in Germany. "VRNG's David Cohen, used this strategy successfully while at NOK to win ~$715M against Apple. ZTE may fight the validity of the patents in another court "the Federal Patent Court system. However, given that the Federal Patent Court system (invalidity hearing) lags about a year behind the regional court (infringement hearing); ZTE faces the risk of not selling its products in Germany for a year. It is this kind of pressure that forced AAPL to settle quickly."
For an analyst ratings summary and ratings history on Vringo, click here. For more ratings news on Vringo, click here.
Shares of Vringo, closed at $3.10 yesterday, with a 52 week range of $1.28-$5.73.
AI
